Assume a project has normal cash flows (i.e., the initial cash flow is negative, and all other cash flows are positive). Which of the following statements is most correct?
A) All else equal, a project's IRR increases as the cost of capital declines.
B) All else equal, a project's NPV increases as the cost of capital declines.
C) All else equal, a project's MIRR is unaffected by changes in the cost of capital.
D) Answers a and b are correct.
E) Answers b and c are correct.

Question

Quizplus · Accepted Answer

As the cost of capital declines, the discount rate used in NPV calculations decreases, leading to a higher NPV. IRR and MIRR are not directly affected by changes in the cost of capital.

Assume a Project Has Normal Cash Flows (I